The people handling the income trust file at the federal Department of Finance could stand to learn a little something about respecting their elders.
As these bureaucrats tally up the tax dollars and economic productivity allegedly lost to trusts, seniors who own these investments are starting to panic. That's not my word, by the way. Judy Cutler, spokeswoman for the Canadian Association of Retired Persons (CARP), used it to describe the tone of the hundreds of letters and e-mails the group is receiving.
"People are really panicked," Ms. Cutler said. "We had no idea how many seniors are actually relying on income trusts. It's quite phenomenal."
You can be sure that CARP now knows how worried seniors are and what the impact of a severe crackdown would be. As for Finance Minister Ralph Goodale and his policy wonks, they don't seem to have a clue.
How could they when they won't even talk to the country's foremost organization representing seniors? Back in the late 1990s, CARP helped influence then-finance minister Paul Martin to back off an initiative to cut seniors' pensions. Today, CARP can't even get a meeting with Mr. Goodale or his staff about an issue that could similarly affect seniors.
Oh, they've tried. Last month, the 400,000-member group sent a letter to Mr. Goodale asking for a meeting about trusts and other issues of interest. "We haven't heard anything back, which is worrying," Ms. Cutler said late last week.
The Finance Department will accept public input on trusts until the end of the year, so there's still time for seniors to get a hearing from Ottawa. Whether or not they'll be taken seriously is up for debate because the department seems interested only in numbers and not in people.
Mr. Goodale has questioned whether trusts "are embedding a kind of sluggishness in the economy." In response to the finding that trusts have cost the treasury about $300-million in taxes, he has told Canadians that "revenue loss is an issue when it gets into the realm of hundreds of millions of dollars." More ominous are the comments by unnamed sources that Mr. Goodale doesn't like trusts one bit.
If that's not enough, there's talk that Finance bureaucrats are dismissing concern about trust reform as nothing but the whining of wealthy investors who got fat on the great returns that trusts have delivered. One department official even likened trusts to film tax shelters in terms of setting out a precedent for the government closing a tax loophole. Film tax shelters, for the 99.99 per cent of the population that never used them, were a tax dodge for the rich that was in vogue a few years ago.
It's the job of the Finance Department to be the government's number crunchers, but it would be unfortunate if there was no room for the human factor in writing a new policy for trusts.
Trusts, either held directly or through hundreds of different mutual funds, are essential in helping seniors generate a decent income today from investments. The big banks today are posting a rate of 2.7 per cent for five-year guaranteed investment certificates, which nets out to a rich return of 0.01 per cent when you factor in the August inflation rate of 2.6 per cent. Trusts, by comparison, yield roughly 5 to 15 per cent.
"We're hearing from retired people across the country who are saying that they're managing to survive because of trusts," Ms. Cutler said. "Energy costs are going up, taxes are going up, rents are going up -- trusts are the only way they can survive. Nobody is saying, 'I have to cut back the number of cruises I go on.' "
The sad thing about Finance ignoring CARP is that the group wants to be collaborative, and not confrontational. In the course of a 12-minute conversation, Ms. Cutler used the word "vote" only once, which is quite restrained in light of the government's minority status.
Ms. Cutler said CARP understands that Ottawa has legitimate concerns, and it realizes that some investors bought into trusts without a proper understanding of risk and diversification. All it wants is a chance to tell Mr. Goodale that seniors will be hurt if he does something that ruins trusts.
"It's taken a long time, but in areas like health care and pensions, governments are starting to recognize the value of input from the people affected," she said. "But in this case, this doesn't seem to be happening."
A Personal Finance column earlier this month talked about how the shrill complaints from some investors showed a lack of understanding of how trusts work. Finance's handling of the trust file suggests a dearth of understanding of how people work.
© The Globe and Mail
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